Teen fast-fashion retail chain Forever 21 has filed for bankruptcy.
The Los Angeles-based apparel firm filed a voluntary Chapter 11 petition Sunday night seeking bankruptcy court protection in Delaware.
Linda Chang, executive vice president of the fast-fashion chain, said, “This was an important and necessary step to secure the future of our company, which will enable us to reorganize our business and reposition Forever 21.”
The company said the filing will help facilitate a global restructuring that will allow it to “focus on a profitable core part of its operations.” Forever 21 plans to exit most of its international locations in Asia and Europe, but will continue operations in Mexico and Latin America.
Forever 21 has $275 million in financing from existing lenders JPMorgan Chase Bank, N.A., and $75 million in new capital from TPG Sixth Street Partners and certain of its affiliated funds.
Chang said, “The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the U.S. and abroad to revitalize our brand and fuel our growth, allowing us to meet our ongoing obligations to customer, vendors and employees.”
In a document filed in a Delaware bankruptcy court, Forever 21 said it operates 549 stores across the U.S. and 251 stores international by non-debtor affiliates. The retailer also operates a 15-unit chain called Riley Rose, a beauty concept started by Chang and her sister, Esther. Both are the daughters of Forever 21’s founders Do Won and Jin Sook Chang. The company also operates some F21 Red stores, a discount concept started in 2014.
Forever 21 plans to close up to about 178 stores, although the company said in a letter to customers posted on its website that a determination on which domestic stores will be shuttered depends on the “outcome of continued conversations with landlords.”
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In the same letter to customers, the chain said the filing allows Forever 21 to “continue to operate its stores as usual” as it takes steps to reorganize operations.
Forever 21 also said, “Once we complete a reorganization, Forever 21 will be a stronger, more viable company that is better positioned to prosper for years to come.”
Just two weeks ago, Forever 21 was in negotiations with landlords, such as Simon Property Group, in an effort to get them to take an investment stake in the business. The goal of those talks was to secure a deal and file a pre-packaged Chapter 11 petition. With landlords on board, that would have likely allowed Do Won to continue the business. Talks broke off on Friday, and a filing was expected to occur within days given the chain’s liquidity crunch.